I am a CPA in Texas with an MBA from the University of Chicago. I have seen a lot and made many mistakes. Hopefully by now I will have learned something from them. Just as importantly, you may learn something from my mistakes. You can e-mail me by clicking on my "View my complete profile".

Sunday, January 18, 2009

Meaghan Moron

WC Varones' 8 January 2009 post has a link to a New York Post article about Meaghan Cheung (MC), former New York enforcement division SEC branch chief who supposedly could not understand what Harry Markoplos (HM) told her about Bernard Madoff's operations. How stupid does MC want us to believe she is? MC went to Yale, then Fordham Law School. Let's give MC a pass, she only has only one Ivy League degree. "As for Markopolos' reference to her supposed lack of mathematical acumen, Cheung said, 'Investigations are conducted by lawyers and examiners and investigators. We have experts available to help us'." Link:

"Mr. [Arthur] Levitt then states that broker-dealers can no longer be allowed to be audited by 'any CPA' or 'mom-and-pop auditor.' I would remind Mr Levitt that Enron, Fannie Mae and Freddie Mac were all audited by major CPA firms while they issued fraudulent financial statements. It takes one good auditor to discover fraud", Kevin Rosenberg letter to the WSJ, 10 January 2009.

"On the beach a few miles south of Palm Beach, I ran into a hedge-fund manager who was mystified that nobody caught on--not because of the steady returns, but because of the apparently low cost. 'Madoff didn't charge any fees!' he practically yelled, piercing the calm of the gentle waves. And nobody--from shoe shiners to CEOs of investment banks--on Wall Street does anything without collecting a fee. ... They didn't bother to ask or find out how Madoff racked up his reliable returns, and didn't demand statements audited by a reputable accounting firm", Daniel Gross at Newsweek, 12 January 2009.

Did MC ever live in the real world? "'[HM] has no basis to judge what we did or did not do in any investigation because we're not able--as we told him at the time--we were not able to give him updates as to what we were or were not doing with his information. And that is a strong commssion policy, that we do not disclose what is happening in a confidential non-public investigation. And that is for the benefit of everyone'." Meaghan Baby, will you suggest the SEC voluntarily give HM its files?

MC is right on the SEC's policy. So? "For the benefit of everyone"? Please. It's to facilitate concealing whatever the SEC wants to conceal. Congress should get off its arse and tell the SEC give HM your files. Now. Let HM, if he is willing, look into this. Then let HM give Congress his findings. And let the heads roll! Call Goldman Sachs (GSG) for a few CNC guillotine rentals. MC, step up, your date with eternity is almost here! My experience with the SEC and (in)Justice Department (DOJ) is like that in the Post article, "Brad Friedman, a lawyer for Madoff's victims, called the SEC's failure to find the fraud stunning. 'They had every red flag in the world,' Friedman said. 'Even with a map and a flashlight, they couldn't find it'." I am sure if GSG's general counsel called Chris Cox saying Madoff defrauded GSG of say $1 million, the SEC and DOJ would have been all over it. Even Linda Thomsen and Michael Garcia would have acted. These agencies are only interested in who the "relator" is, not what's "related".

I agree with Rosenberg. Go through the list. Which major financial fiasco in recent years did not have a large CPA firm auditor? Who will select the CPA firms to audit broker-dealers? The PCAOB, a Big 87654 cartel enforcer? The SEC which runs a rating agency cartel and is hopelessly compromised? Who Mr. Levitt, you? Do you want the CPAs for: Satyam, Freddie, Fannie, Citigroup, AIG, Countrywide, Lehman or Bear doing your audits?

No fees?! Wow. Which accounting firms does Gross consider reputable? Surely none of the Big 87654.

Junior:You got what YS would call "The money quote". What I think MC meant to say was that she spent ten years licking every NY BigLaw partner's boots she saw and was unable to translate that and her position as NY SEC Enforcement Chief into a $1-3 million a year job. Poor MC. Apparently she didn't know whose boots to lick. MC must be the stupidest Yale graduate in decades. If she needed advice, Gary Lynch might have helped her. Did she have the good sense to ask him? I have an idea for MC if she needs a job. Of course if she does this, "they" will drum her out of the corps; she can go to work for a plaintiffs' bar class-action firm. Now that would be a switch. I suspect she might be the only Ivy Leaguer there.